China extends record imports of Russian oil into June

China extended record imports of low-priced Russian crude oil into June despite a lockdown-induced slackening in its total crude oil imports, squeezing out supplies from the Middle East and West Africa, according to tanker trackers and traders.

Russia remained China’s top supplier for the second month in a row, surpassing Saudi Arabia, according to tanker tracking specialists Vortexa, Kpler and Refinitiv.

China is the world’s top importer of crude and Russian oil helps Chinese refiners keep costs down at a time when their margins are crimped by slowing demand from strict Covid-19 controls and Beijing’s restrictions on fuel exports amid supply concerns.

June imports of Russian oil -- including seaborne shipments and pipeline supplies -- are set to total about 2 million barrels per day (bpd), or 15per cent of China’s crude demand, on par with May’s record volume, these analysts said.

Meanwhile, overall Saudi oil imports in June are forecast to slump to a near two-year low of 1.3 million bpd, Refinitiv estimated.

Seaborne Russian shipments were estimated at between 1.04 and 1.15 million bpd last month, steady versus May’s near-record high at around 1.1 million bpd, according to the analytics firms.

Separately, China is set to receive approximately 880,000 bpd of Russian oil via the two East Siberia-Pacific Ocean Pipelines (ESPO) and the Kazakhstan-China pipeline under government deals, with all the three projects pumping at maximum rates, said two traders with knowledge of the matter. Alongside India, the world’s third-largest crude importer, the Asian economic powerhouses have since May ramped up Russian oil imports after western companies backed off dealing with Moscow for fear of falling foul of sanctions over Russia’s invasion of Ukraine or drawing negative publicity.

Combined, the two countries bought an additional 1 million bpd of Russian oil in May versus April, according to Chinese customs and Indian trade sources. That is equivalent to a fifth of Russia’s total exports, providing Moscow a buffer from western sanctions while bolstering refining profits at home.

In China, state refiner Sinopec Corp remains the top buyer of ESPO blend crude, Russia’s flagship export grade from Far Eastern port Kozmino, lifting 12 shipments or a third of Russia’s seaborne ESPO sales in June, Vortexa’s analyst Emma Li said. In May, Sinopec scooped 15 shipments, tripling the state major’s volume before the war, according to Li and two traders.

“In terms of profitability, Unipec far excels and leads among Chinese players by sitting at the top of the food chain - dealing with top Russian suppliers at the steepest possible discounts,” said a trader, referring to Sinopec’s trading arm.

Sinopec’s purchases, totalling some 20 million barrels over May and June, were sent to its refineries. Some of the cargoes had been bought at a record discount of $20 a barrel below benchmark Dubai crude on an FOB Kozmino basis, traders said.

That’s a boon for Sinopec refineries as Chinese fuel demand began to recover from late May after months of Covid-induced lockdowns, traders said.